In a Tuesday forum in San Francisco, CCA advocates laid out
how these city- and county-based entities, which have grown
to include millions of customers formerly served by the state’s investor-owned
utilities, are pushing ahead of the renewable energy and carbon reduction goals
set out in California’s just-passed SB 100.

They also highlighted how several policies
under review by state regulators could stymie the growth of CCAs,
including rules that govern how investor-owned utilities are compensated for
customers taken over by CCAs, and how the two parties share responsibility for
procuring the energy resources needed to keep the grid stable.

“We’ve had an explosion of CCAs in the past couple of
years,” said Beth Vaughan, executive director of the California Community
Choice Association. CalCCA’s 19 members now account for nearly 2.6 million
customer accounts, up from about 1.85 million accounts at the end of
2017.

Most of the action has been in Northern California. These
include several of the oldest CCAs in the state — Marin Clean Energy with
470,000 customer accounts and Sonoma Clean Power with 223,000. There are also
more recently launched CCAs, such as Monterey Bay Community Power with 307,000
customer accounts, Peninsula Clean Energy with 291,000, Silicon Valley Clean
Energy with 275,000, and East Bay Community Energy with 550,000.

Taken together, these CCAs add up to 2.1 million customer
accounts out of utility Pacific Gas & Electric’s 5.4 million electricity
customer accounts and 4.3 million natural gas customer accounts.

While Southern
California hasn’t seen as many CCAs formed to date, Southern California Edison
and San Diego Gas & Electric are both looking at large-scale CCAs being
formed in their service territories, as well as dozens of cities interested in
following the lead of Lancaster, California’s Lancaster Choice Energy.

And the pace of CCA formation is accelerating. Dawn Weisz,
CEO of Marin Clean Energy, explained that she arrived late to Tuesday’s forum
because she had just come from a meeting that cemented Solano County as MCE’s
newest member.

While CCAs remain a small percentage of the state’s utility
customers, the California Public Utilities Commission estimates that up
to 85 percent of the state’s retail load could be served by CCAs, as well
as by direct access providers, by 2025. These trends are seen as an
existential threat for California’s investor-owned utilities. According to
state Senator Scott Wiener (D-San Francisco), the utility fight against the CCA
model is continuing.

“Every year, there are probably three or four different
efforts, sometimes with a fresh bill, sometimes with a quiet amendment inserted
into another bill, other times trying to push something through at the last
moment," that are meant "to try [to] blow up CCAs,” Wiener said at
Tuesday’s forum.

The most recent example he cited was language inserted into
one of this legislative session’s controversial utility wildfire bills “that
would completely undermine CCAs," he said. "Some of us had to...hound
people for weeks on end before the language was taken out.”

Utilities have long protested that the rules of CCA
formation leave them with too high a share of the costs of serving those
customers. While CCAs take over the job of procuring energy for their
customers, which allows them to exceed utility renewables mandates and increase
the roster of clean energy projects being built in the state, utilities remain
responsible for all other aspects of keeping the power flowing, including the
costs of maintaining transmission and distribution grids and managing customer
billing.

But in the context of this week’s Global
Climate Action Summit in San Francisco, CCA advocates say they’re
fulfilling the promise that led legislators to create them in the first place —
giving customers an avenue to support even more aggressive clean energy targets
than the state has set.

How CCAs are hitting their clean energy targets

Most of California’s CCAs have been formed with the express
aim of increasing their share of renewables faster than the investor-owned
utilities they’re part of, Vaughan said. To date, they’ve contracted for more
than 1,300 megawatts of renewable energy.

CCAs also provided the first 100 percent clean energy
options for customers in the state — a move that prompted utilities like
PG&E to follow suit, Wiener said.

At the same time, CCAs have been able to deliver their
customers lower rates than their utility counterparts for both their standard
renewable-rich plans and their 100-percent-clean offerings. That’s largely
because CCAs have been able to procure their renewables much more cheaply over
the past several years, compared to utilities that have been procuring solar
and wind power under state mandate for more than a decade, back when wind and
solar were much more expensive.

According to a 2017 report from UCLA’s Luskin Center for Innovation, this
underlying market reality has allowed CCAs to offer a much larger share of renewable
energy than their affiliated utilities, up to 25 percent more in some cases.
Looking at a 12-month period before its publication last year, the report
estimated that these efforts have helped reduce carbon emissions by about
590,000 metric tons, which under the state’s cap-and-trade regime translates to
$7.5 million in annual savings for electricity ratepayers.

“Through our analysis, we found that continued development
of CCAs may enable California to surpass its 2020 renewable energy targets by
up to four percentage points,” the Luskin Center report said. This analysis was
based on the performance of the five oldest CCAs, however, and doesn’t account
for the new ones that have been created or proposed since then.

Tuesday's event brought out several CCAs to tout their
accomplishments on this front. Marin Clean Energy, founded in 2008, now has
$1.8 billion in committed contracts for a total of 924 megawatts of resources,
said Heather Shepard, MCE public affairs director. As of this year, 80 percent
of that generation is greenhouse-gas-free. By 2025, MCE plans to bring that figure up to 100 percent,
with 80 percent of it in the form of renewable energy — a target that would put
MCE far ahead of investor-owned utilities in meeting the state’s new SB 100
goals.

This includes a fair share of wind and solar projects
outside its service area, but MCE has also deployed just under 20
megawatts in local projects, said David Potovsky, MCE’s power supply
contracts manager. Its feed-in tariff program, launched in 2012 for projects
smaller than 1 megawatt, is now fully subscribed for first 15 megawatts,
and is adding another 15 megawatts, he noted.

CleanPowerSF, the CCA launched by San Francisco Public
Utility District in 2016, now has about 114,000 customers, including some
showcase clients like Salesforce, which is buying 100 percent renewable
energy for its Salesforce Tower and two other office buildings. In June,
CleanPowerSF signed long-term contracts for 100 megawatts of solar
and 47 megawatts of wind, said San Francisco Public Utilities Commission
assistant manager Barbara Hale.

And San Mateo County-based CCA Peninsula Clean Energy, which
began serving its first customers in late 2016, inked its first 200-megawatt solar contract last year, and has since
signed up big commercial customers for its 100 percent clean energy
offering, including Facebook's Menlo Park, Calif. headquarters,
communications director Kirsten Andrews-Schwind noted.

The continued growth of CCAs is of concern to the
CPUC, which
published a report this year that questions whether CCA growth could
undermine the state’s broader clean energy and carbon reduction goals.

But MCE CEO Dawn Weisz asserts that “what the [CPUC's
report] got wrong is, there is no crisis” resulting from CCA expansion. “If
anything, we’re creating a more diverse marketplace. And adding local
accountability and transparence really adds a lot of strength.”

How key policy decisions could support or undermine CCA
clean energy plans

Despite their record to date, CCAs have had some challenges
that utilities don’t face in procuring large-scale renewables, such as their
relative lack of financial reserves and creditworthiness to ink long-term
contracts. And as the Luskin Center report noted, “whether CCAs can remain
cost-competitive with their incumbent IOUs depends on several policy decisions
that could occur in the near future.”

The first big issue is over the Power Charge Indifference
Adjustment, or PCIA — the “exit fee” that CCAs pay utilities when they take
over their customers, Weisz said. The goal of the PCIA is “to make
investor-owned utilities whole,” or "indifferent" as to whether or
not the customer stays with them or joins the CCA, she said (hence the term
“indifference adjustment”).

The CPUC has been working on the PCIA issue for more than a
year. Last month, it issued a proposed decision that, while far from
perfect from both the utility and the CCA perspective, does take important
steps toward “fair cost allocation,” Weisz said. These include measures to stop
charging CCAs for utility-owned generation built before 2002, as well as to
limit post-2002 generation costs to a 10-year cost recovery period. These
factors will take a significant chunk of legacy utility costs out of the
equation.

CalCCA believes these changes will help reduce
today’s cost shifts from utility “bundled” to CCA “departing load
“customers, which it calculates as up to $492 million annually for PG&E and
up to $25 million annually for Southern California Edison in 2018. But utilities complain that these changes will unfairly
burden them with legacy generation costs that should be shared by their former
customers, and could potentially lead to CCAs disrupting the state’s energy
markets.

Now, the CPUC is also considering an alternative PCIA plan
that would increase, not decrease, those charges by retaining legacy generation
costs, as well as imposing additional burdens on CCAs, according to CalCCA’s analysis. The CPUC is expected to
make a final decision later this month.

“The real crux of the issue is that we want to make sure
that what’s going into that fee are the unavoidable costs to utilities,” Weisz
said. “There’s a lot of stuff in that fee that could have been
avoided."

The second big issue before CCAs is resource adequacy, or RA
— California’s term for the capacity resources that all load-serving entities,
including CCAs, have to procure to ensure grid reliability during times of peak
demand. Under current CPUC regulations, CCAs have covered the cost of their
host utilities procuring resource adequacy through the PCIA charge. It's a
method that made sense when CCAs were few and small, but which becomes
increasingly difficult to manage under their current growth rates.

In February,
the CPUC adopted a resolution that would force CCAs to contract for
some portion of their share of RA requirements in the current year. CCAs
protested, saying it could undermine their low-cost renewables goals by forcing
them to buy short-term contracts for resources such as natural gas peaker
plants that can meet the state’s needs.

“CCA compliance in resource adequacy requirements has been
good. But it is challenging, because the market is tightening, and products can
be difficult to procure,” SFPUC’s Barbara Hale said at Tuesday's event.

Beyond that, CCAs want to see changes in how the PCIA
calculates RA costs, Weisz said. “Right now, resource adequacy is being valued
in this PCIA in very short-term increments — one year, two years,” she said.
CCAs are pushing for a methodology that allows for the RA value of their
long-term contracts to be calculated as well.

At the same time, CCAs are moving alongside California’s
investor-owned utilities to find cleaner ways to manage resource adequacy,
including distributed energy resources such as energy efficiency, demand
response, energy storage and EV charging, she said.

MCE has a pilot project attempting to shift loads at
customers’ homes and businesses from peak afternoon and evening hours to
earlier in the day when solar power is plentiful, she said. It’s also employing
EV charging incentives that encourage workplace charging during peak solar
generation hours, rather than later in the day. CalCCA’s Vaughan noted that all
of its group's members are working on EV charging infrastructure plans aimed at
accomplishing similar load-shifting and -shaping goals.

As CCAs grow their share of the California energy market,
their role in maintaining and creating new resources for grid stability will
increase. This could well lead to more regulations to incorporate them into
state energy policy. CPUC President Michael
Picker has laid out some ideas on this front, including creating a
statewide integrated procurement process to rationalize what could become an
increasingly fragmented market for renewables project development.

And in the longer run, CCAs that have relied on short-term
procurements because of their lack of creditworthiness for longer-term
power-purchase agreement contracts will have to grow to a scale that can
support their share of the state’s long-range needs. Under SB 350, by 2021 at
least 65 percent of a CCA’s renewable portfolio will have to come from
contracts of 10 years or more — a rule that “could impact the
cost-competitiveness of some CCAs due to their lack of credit history,” the
Luskin Center report noted.

Getting to a 100 percent clean energy portfolio by 2045 is
likely to bring additional challenges.